Alberta to cut royalty rates in effort to squeeze out more oil, gas production

Pumpjacks pump crude oil near Halkirk, Alta., June 20, 2007 .
Pumpjacks pump crude oil near Halkirk, Alta., June 20, 2007 . THE CANADIAN PRESS/Larry MacDougal

CALGARY – The Alberta government is introducing two new royalty programs to encourage the energy sector to spend more on developments in their early stages and squeeze more oil and gas from underutilized existing operations.

READ MORE: Alberta sets out details for new oil and gas royalty framework

Under the Enhanced Hydrocarbon Recovery Program and the Emerging Resources Program, companies would pay reduced royalty rates on those projects for a longer period.

CEO Tim McMillan of the Canadian Association of Petroleum Producers says the new royalty system recognizes the higher risks and greater costs of drilling associated with emerging developments and wringing out as much oil and gas from ongoing operations.

The changes were recommended by the provincial royalty review advisory panel in January.

READ MORE: Royalties remain the same for Alberta oilsands projects, says Notley

They are to take effect as of Jan. 1, at the same time as Alberta’s overall new royalty framework.